Published January 31, 2009

Contract amount not at stake: Keppel

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DESPITE an adverse market reaction where Keppel Corp shares lost five cents to close at $4.05 yesterday, analysts are not unduly worried about the state of the latest contract difficulties between its US unit Keppel AmFels and its client Rowan Companies, mainly because of the good financial position of the US contract drilling services provider.

'Rowan appears to be in a relatively healthy position with a net gearing of only 10.5 per cent (Sept 2008) and has US$155 million of credit available under an undrawn credit facility, according to an article in Energy Current,' Deutsche Bank said in a recent report.

Analysts are also impressed by Keppel's cash pile. 'Keppel is in a strong position, with its robust balance sheet and sizeable cash pile, which should allow it to ride out the difficult operating conditions. Keppel currently has a net cash position of $275 million,' added Deutsche Bank.

In addition, Keppel reiterated that construction on only one of the four jack-up rigs that it is building for Rowan is being suspended, while the other three of the four rig order is ongoing. 'The contract amount of US$780 million for all four rigs is not at stake. Keppel AmFels is under no obligation to revise its contractual terms on the rig orders from Rowan Companies,' a Keppel spokesman said. 'Nevertheless, it is reviewing Rowan's recent request for a temporary suspension of its fourth rig, and will agree only if terms are acceptable to Keppel AmFels.'